<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as
permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
QUAKER CITY BANCORP, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials:
--------------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
--------------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------------
<PAGE>
[Q Logo] Quaker City Bancorp, Inc.
7021 Greenleaf Avenue
Whittier, CA 90602
(562) 907-2200
October 5, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
(the "Annual Meeting") of Quaker City Bancorp, Inc. (the "Company"), the holding
company for Quaker City Bank (the "Bank"), scheduled to be held on Wednesday,
November 15, 2000, at the Whittier Hilton, 7320 Greenleaf Avenue, Whittier,
California, at 10:00 a.m. local time. As described in the accompanying Notice
of Annual Meeting of Stockholders and Proxy Statement, stockholders will be
asked to vote on the election of directors for the Company. Directors and
executive officers of the Company will be present at the Annual Meeting to
respond to any questions that our stockholders may have regarding the business
to be transacted.
I urge you to vote your proxy as soon as possible. Your vote is very
important, regardless of the number of shares you own. Whether or not you plan
to attend the Annual Meeting in person, I urge you to sign, date and return the
enclosed proxy card promptly in the accompanying postage prepaid envelope. You
may, of course, attend the Annual Meeting and vote in person even if you have
previously returned your proxy card.
On behalf of the Board of Directors and all of the employees of the Company
and the Bank, I wish to thank you for your continued support.
Sincerely yours,
/s/ FREDERIC R. McGILL
FREDERIC R. (RICK) McGILL
President and Chief Executive Officer
IMPORTANT: If your Quaker City Bancorp, Inc. shares are held in the name of a
brokerage firm or nominee, only they can execute a proxy on your behalf. To
ensure that your shares are voted, please telephone the individual responsible
for your account today and obtain instructions on how to direct him or her to
execute a proxy on your behalf.
If you have any questions concerning the Proxy Statement or accompanying
proxy or if you need any help in voting your stock, please telephone Morrow &
Company at 1-800-856-8309 today.
--------------------------------------------------------------------------------
PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD TODAY.
--------------------------------------------------------------------------------
<PAGE>
Quaker City Bancorp, Inc.
7021 Greenleaf Avenue
Whittier, CA 90602
(562) 907-2200
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on November 15, 2000
_______________________
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Annual Meeting") of Quaker City Bancorp, Inc. (the "Company"), the holding
company of Quaker City Bank, will be held on Wednesday, November 15, 2000, at
the Whittier Hilton, 7320 Greenleaf Avenue, Whittier, California, at 10:00 a.m.
local time, subject to adjournment or postponement by the Board of Directors,
for the following purposes:
1. To elect three persons to the Board of Directors to serve until
the annual meeting of stockholders to be held in the year 2003 and until
their successors are duly elected and qualified;
2. To transact such other business as may properly come before the
Annual Meeting or any or all adjournment or postponements thereof.
Only holders of record of the common stock, par value $.01 per share, of
the Company on Thursday, September 21, 2000, will be entitled to notice of, and
to vote at, the Annual Meeting and any adjournment or postponement thereof.
Prior to the voting thereof, a proxy may be revoked by the person executing
such proxy by (i) filing with the Corporate Secretary of the Company, prior to
the commencement of the Annual Meeting, either a written notice of revocation or
a duly executed proxy bearing a later date or (ii) by voting in person at the
Annual Meeting.
By order of the Board of Directors
/s/ KATHRYN M. HENNIGAN
KATHRYN M. HENNIGAN
Corporate Secretary
Whittier, California
October 5, 2000
--------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES, PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
--------------------------------------------------------------------------------
<PAGE>
Quaker City Bancorp, Inc.
7021 Greenleaf Avenue
Whittier, CA 90602
(562) 907-2200
-------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
November 15, 2000
-------------------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board" or the "Board of Directors") of Quaker City
Bancorp, Inc., a Delaware corporation (the "Company"), the holding company of
Quaker City Bank (the "Bank"), of proxies for use at the 2000 Annual Meeting of
Stockholders of the Company (the "Annual Meeting") scheduled to be held at the
time and place and for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders.
INFORMATION REGARDING VOTING AT THE ANNUAL MEETING
General
At the Annual Meeting, the stockholders of the Company are being asked to
consider and to vote upon the election of the three directors nominated by the
Company's Board of Directors to serve until the annual meeting of stockholders
to be held in the year 2003. For information regarding the proposal regarding
the election of directors, see the section of this Proxy Statement entitled
"ELECTION OF DIRECTORS." Shares represented by properly executed proxies
received by the Company will be voted at the Annual Meeting in the manner
specified therein or, if no instructions are marked on the enclosed proxy card,
FOR each of the director nominees identified on such card. Although management
does not know of any matter other than the election of directors to be acted
upon at the Annual Meeting, unless contrary instructions are given, shares
represented by valid proxies will be voted by the persons named on the
accompanying proxy card in accordance with their respective best judgment with
respect to any other matters that may properly come before the Annual Meeting.
Execution of a proxy will not in any way affect a stockholder's right to
attend the Annual Meeting and vote in person, and any person giving a proxy has
the right to revoke it at any time before it is exercised by (i) filing with the
Corporate Secretary of the Company, prior to the commencement of the Annual
Meeting, a duly executed instrument dated subsequent to such proxy revoking the
same or a duly executed proxy bearing a later date or (ii) attending the Annual
Meeting and voting in person.
The mailing address of the principal executive offices of the Company is
7021 Greenleaf Avenue, Whittier, California 90602, and its telephone number is
(562) 907-2200. The approximate date on which this Proxy Statement and the
enclosed proxy card are first being sent to stockholders is October 6, 2000.
Record Date and Voting
Only stockholders of record on Thursday, September 21, 2000 (the "Record
Date"), will be entitled to notice of and to vote at the Annual Meeting. There
were outstanding on the Record Date 5,096,077 shares of common stock, par value
$.01 per share, of the Company ("Common Stock") as adjusted for the 25% Common
Stock dividend paid to stockholders by the Company on or about May 30, 1997 (the
"1997 Stock Dividend") and June 30, 1998 (the "1998 Stock Dividend" and,
together with the 1997 Stock Dividend, the "Stock Dividends"). All information
set forth herein regarding numbers of shares and exercise prices of outstanding
awards under Company stock benefit plans has been adjusted, to the extent
applicable, for the effect of the Stock Dividends.
2
<PAGE>
Each share of outstanding Common Stock is entitled to one vote on each matter to
be voted on at the Annual Meeting.
As provided in the Company's Certificate of Incorporation, holders of
Common Stock who beneficially own in excess of 10% of the outstanding shares of
Common Stock (the "Limit") are not entitled to any vote with respect to the
shares held in excess of the Limit. A person or entity is deemed to
beneficially own shares owned by an affiliate of, as well as persons acting in
concert with, such person or entity. The Company's Certificate of Incorporation
authorizes the Board of Directors (i) to make all determinations necessary to
implement and apply the Limit, including determining whether persons or entities
are acting in concert, and (ii) to demand that any person who is reasonably
believed to beneficially own stock in excess of the Limit supply information to
the Company to enable the Board to implement and apply the Limit.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of shares of Common Stock entitled to vote (after
subtracting any shares held in excess of the Limit pursuant to the Company's
Certificate of Incorporation) is necessary to constitute a quorum at the Annual
Meeting. In the event there are not sufficient votes for a quorum at the time
of the Annual Meeting, the Annual Meeting may be adjourned in order to permit
the further solicitation of proxies.
Abstentions and broker non-votes are counted for the purpose of determining
the presence or absence of a quorum for the transaction of business. With
regard to the election of directors, votes may be cast in favor or withheld;
votes that are withheld will be excluded entirely from the vote and will have no
effect. Abstentions are counted in tabulations of the votes cast on proposals
presented to stockholders other than the election of directors, thus having the
effect of a negative vote, whereas broker non-votes are not counted for purposes
of determining whether a proposal has been approved. Directors will be elected
by a plurality of the votes of the shares of Common Stock present in person or
represented by proxy and entitled to vote on the election of directors.
Approval of any stockholder proposals that properly come before the Annual
Meeting require the affirmative vote of a majority of the shares of Common Stock
present, in person or represented by proxy, at the Annual Meeting and entitled
to vote on the subject matter. Shares in excess of the Limit will not be
counted for either the purpose of determining the presence or absence of a
quorum or whether a proposal has been approved.
Solicitation
The cost of preparing, assembling and mailing the Notice of Annual Meeting
of Stockholders, this Proxy Statement and the enclosed proxy card will be paid
by the Company. Following the mailing of this Proxy Statement, directors,
officers and other employees of the Company may solicit proxies by mail,
telephone, telegraph or personal interview. Such persons will receive no
additional compensation for such services. Brokerage houses and other nominees,
fiduciaries and custodians nominally holding shares of Common Stock of record
will be requested to forward proxy soliciting material to the beneficial owners
of such shares, and will be reimbursed by the Company for their reasonable
charges and expenses in connection therewith. In addition, the Company has
retained proxy solicitor Morrow & Co., Inc. ("Morrow & Co.") to assist in the
solicitation of proxies. Morrow & Co. may solicit proxies by mail, telephone,
telegraph and personal solicitation, and will request brokerage houses and other
nominees, fiduciaries and custodians nominally holding shares of Common Stock of
record to forward proxy soliciting material to the beneficial owners of such
shares. For these services, the Company will pay Morrow & Co. a fee estimated
not to exceed $6,000, plus reimbursement for reasonable out-of-pocket expenses.
________________________
The date of this Proxy Statement is October 5, 2000.
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
Directors
The following table sets forth certain information, except where otherwise
indicated, as of June 30, 2000 with respect to the directors of the Company and
the Bank. While Mr. Ferguson as Director Emeritus attends meetings of the Board
of Directors of the Company and of the Bank, he does not vote upon matters
presented to the Boards.
Each of the directors of the Company serves a three-year term and
approximately one-third of the directors are elected at each annual
stockholders' meeting. The Bank continues to have a classified board,
approximately one-third of the members of which are elected each year to serve
three-year terms.
<TABLE>
<CAPTION>
First
Term as Became Term as Position Held
First Became Bank Director Company with the
Director of Director of Director Company
Name of Director Age Bank Expires Company Expires and the Association
--------------------- ----- ----------- ------- ------ -------- -------------------
<S> <C> <C> <C> <C> <C> <C>
J.L. Thomas 64 1975 2000 1993 2000 Director and Chairman of
the Board
Frederic R. McGill 53 1995 2001 1995 2001 Director, President and
Chief Executive Officer
David S. Engelman 62 1999 2002 1999 2002 Director
Alfred J. Gobar 67 1992 2001 1993 2001 Director
Wayne L. Harvey 62 1981 2000 1993 2000 Director
David K. Leichtfuss 55 1991 2002 1993 2002 Director
Edward L. Miller 63 1985 2000 1993 2000 Director
D. W. Ferguson 84 1952 N/A 1993 N/A Director Emeritus
</TABLE>
Set forth below is certain information concerning the principal occupation
and business experience of each of the individuals named above during the past
five years.
J.L. Thomas is Chairman of the Company and the Bank. Mr. Thomas served as
President and Chief Executive Officer of the Company since its formation in 1993
until July of 1996. Mr. Thomas joined the Bank in 1961, and was elected to the
Board of Directors in 1975. Mr. Thomas served as Chief Operating Officer of the
Bank from 1976 to 1982, and became its President and Chief Executive Officer in
1982, serving in that capacity until July of 1996. Mr. Thomas also serves as
the Chairman of the Board of Directors of Quaker City Financial Corp., a wholly
owned subsidiary of the Bank ("QCFC"), and of Quaker City Neighborhood
Development, Inc. a wholly owned subsidiary of the Company ("QCND").
Frederic R. (Rick) McGill served as Executive Vice President and Chief
Operating Officer of the Company since its formation in 1993, serving in that
capacity until July of 1996. Mr. McGill joined the Bank in 1991 as Executive
Vice President and Chief Operating Officer. Mr. McGill was appointed President
of and elected to the Board of Directors of the Company and the Bank in 1995,
and was appointed Chief Executive Officer effective July 1, 1996. Prior to
joining the Bank, Mr. McGill was an independent financial consultant
specializing in mortgage banking. Mr. McGill has over 30 years experience in
the banking industry. Mr. McGill has also served as the Chief Executive Officer
of QCFC since 1991 and of QCND since July 1, 1996.
4
<PAGE>
David S. Engelman, a private investor, served as Chairman, Chief Executive
Officer and President of UnionFed Financial Corporation from 1991 until 1997 and
held the same positions at its subsidiary, Union Federal Bank. Mr. Engelman is
a director of Fleetwood Enterprises, Inc., MGIC Investment Corporation and
Mortgage Guaranty Insurance Corporation and a former director of Long Beach
Financial Corporation where he served from 1997 to 1999. Mr. Engelman was
appointed a director of the Company and the Bank effective September, 1999. Mr.
Engelman is the Chairman of the Bank's Philanthropy Committee.
Alfred J. Gobar is President and Chairman of AJGA, Inc., a family-owned
economics consulting firm. Mr. Gobar has held this position since 1990. Prior
to 1990, Mr. Gobar served as President and Chairman of Alfred Gobar Associates,
Inc., a family-owned economics consulting firm. Mr. Gobar has been a director
of the Bank since 1992 and of the Company since its formation in 1993.
Wayne L. Harvey, retired, was previously the Managing Partner of Harvey &
Parmelee, certified public accountants, and was with such firm from 1958 until
1998. Mr. Harvey has been a director of the Bank since 1981 and of the Company
since its formation in 1993. Mr. Harvey is the Chairman of the Audit Committee
of the Company's Board.
David K. Leichtfuss is the President of Broadview Mortgage Corp., a
mortgage banking company that specializes in residential permanent financing,
and has been with such company since 1988. Mr. Leichtfuss has been a director
of the Bank since 1991 and of the Company since its formation in 1993.
Edward L. Miller is a partner in the law firm of Bewley, Lassleben & Miller
and has been associated with such firm since 1963. Mr. Miller has been a
director of the Bank since 1985 and of the Company since its formation in 1993.
Mr. Miller is the Chairman of the Compensation Committee of the Company's Board.
D.W. Ferguson is Director Emeritus of the Board of the Company and the
Bank. Mr. Ferguson served as Chairman of the Company since its formation in
1993 until November of 1995. Mr. Ferguson joined the Bank in 1937 and held
various positions prior to becoming the President and Chief Executive Officer in
1951, a position he held until 1982. Mr. Ferguson was elected to the Board of
Directors of the Bank in 1952 and served as the Chairman of the Bank's Board
from 1982 to 1995.
Committees of the Board of Directors
The Company's Board of Directors has a standing Audit Committee and
Compensation Committee.
The Audit Committee held 4 meetings during the 2000 fiscal year, and
currently consists of Messrs. Harvey (Chairman), Miller and Engelman. The
Audit Committee's responsibilities are generally to assist the Board in
fulfilling its legal and fiduciary responsibilities relating to accounting,
audit and reporting policies and practices of the Company, the Bank and their
subsidiaries. The Audit Committee also, among other things, oversees the
Company's financial reporting process, recommends to the Board the engagement of
the Company's independent auditors; monitors and reviews the quality and
activities of the Company's internal audit function and those of its independent
auditors; and, monitors the adequacy of the Company's operating and internal
controls as reported by management and internal auditors. The Board has adopted
a written charter for the Audit Committee. The Audit Committee charter is
included as Appendix A hereto. The members of the Audit Committee are
independent directors as defined under the National Association of Securities
Dealers' listing standards.
The Compensation Committee held 2 meetings during the 2000 fiscal year, and
currently consists of Messers. Miller (Chairman), Harvey and Engelman. The
Compensation Committee is authorized to review salaries and compensation,
including non-cash benefits, of directors, officers and other employees of the
Company and to recommend to the Board salaries, remuneration and other forms of
additional compensation and benefits as it deems necessary. In July of 1996,
the Board established a subcommittee of the Compensation Committee, currently
made up of two non-employee directors, Messrs. Engelman and Harvey, whose
principal
5
<PAGE>
responsibility is to administer for purposes of Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and rules thereunder, the
stock benefit plans of the Company with respect to certain transactions by
executive officers and directors of the Company.
The Company's Board of Directors selects nominees for election as
directors. The Company does not have a standing nominating committee. The
candidates for election at this Annual Meeting were nominated by the Board of
Directors. In accordance with Section 6 of Article I of the Company's Bylaws (a
copy of which is available upon request to the Corporate Secretary of the
Company), stockholder nominations for election of directors may be voted on at
an annual meeting only if such nominations are made pursuant to written notice
timely given to the Corporate Secretary accompanied by certain information. To
be timely, a stockholder's written notice must be delivered to or mailed and
received at the principal executive offices of the Company not less than 90 days
prior to the date of the meeting, provided that, in the event that less than 100
days' notice or prior disclosure of the date of the meeting is given or made to
stockholders, a stockholder's notice will be timely if received not later than
the tenth day following the day on which such notice of the date of the meeting
is mailed or such public disclosure is made. Such stockholder's notice must set
forth with respect to each director nominee all of the information relating to
such person that is required to be disclosed in solicitations for elections of
directors under the rules of the Securities and Exchange Commission ("SEC") and
the stockholder's name and address, as they appear on the Company's books, and
the number of shares of Common Stock owned by the stockholder giving the notice.
Meetings of the Board of Directors
During the 2000 fiscal year, there were 12 meetings of the Board of
Directors of the Company. All directors attended at least 75% of the meetings
of the Board of Directors, and all members of the committees of the Board
attended at least 75% of the meetings of those committees, in each case, after
the election of such individual to the Board or to such committee.
Compensation of Directors
Directors' Fees. The Company does not currently pay directors' fees.
Currently, the directors of the Bank receive a monthly retainer fee of $2,000
each. Committee meeting fees of $100 per hour per meeting are also paid to non-
employee directors of the Bank. In addition, a $200 monthly retainer is paid to
the Audit Committee Chairman for general services in addition to meetings.
Directors' Options. In 1993, the Company adopted a stock option plan for
directors who are not officers or employees of the Company or its affiliates.
See "COMPENSATION AND OTHER INFORMATION--Non-Employee Directors' Option Plan,"
below. In 1997, the Company adopted a stock incentive plan for employees and
directors that provides for the grant of awards ("Awards") in the form of stock
options (including incentive stock options or nonqualified stock options),
restricted stock, stock appreciation rights, stock payments, dividend
equivalents, stock bonuses, stock sales, phantom stock and other stock-based
benefits. See "COMPENSATION AND OTHER INFORMATION--1997 Stock Incentive Plan,"
below. In June 2000, grants of 5,000 nonqualified stock options with vesting on
the first anniversary of the option grant date were made to each of the outside
directors, all of which options were granted at an exercise price of $15.125 per
share. Beginning October 1, 2000, the Chairman of the Board will receive a
quarterly grant of 1,250 Non-qualified Options, valued at the closing market
price of the Common Stock as reported on the Nasdaq National Market on the first
business day of the quarter.
Executive Officers
Set forth below are the executive officers of the Company, together with
the positions currently held by those persons, as of June 30, 2000. The
executive officers serve at the pleasure of the Company's Board of Directors;
however, the Company has entered into employment agreements with Messrs. Thomas
and McGill,
6
<PAGE>
which agreements are described under "COMPENSATION AND OTHER MATTERS--Employment
Agreements and Change of Control Arrangements," below.
<TABLE>
<CAPTION>
Name Age Position (1)
---------------------- ----- ------------------------------------------------------------------------
<S> <C> <C>
Kathryn M. Hennigan 49 Corporate Secretary and Senior Vice President, Administrative Services
Hank H. Kadowaki 53 Senior Vice President, Income Property Lending of the Bank
Frederic R. McGill 53 Director, President and Chief Executive Officer
Jerrold Perisho 48 Senior Vice President, In-Store Banking of the Bank
Harold L. Rams 54 Senior Vice President, Single Family Lending of the Bank
Karen A. Tannheimer 41 Senior Vice President, Loan Service of the Bank
Robert C. Teeling 49 Senior Vice President, Retail Banking of the Bank
J.L. Thomas 64 Director and Chairman of the Board
Dwight L. Wilson 52 Senior Vice President, Treasurer and Chief Financial Officer
</TABLE>
-------------------
(1) Unless otherwise indicated, the indicated position is with the Company and
the Bank.
Set forth below is certain information concerning the business experience
during the past five years of each of the individuals named above (other than
Mr. Thomas and Mr. McGill--see "Directors" above).
Kathryn M. Hennigan has served as Senior Vice President, Administrative
Services and Corporate Secretary of the Company since its formation in 1993.
Ms. Hennigan joined the Bank in 1992 as the Human Resource Manager. Ms.
Hennigan was promoted to Senior Vice President, Administrative Services and
Corporate Secretary of the Bank in January, 1993. Prior to joining the Bank,
Ms. Hennigan held various management and administrative positions, including
principal for seven years at a senior high school in Fullerton, California.
Hank H. Kadowaki joined the Bank in 1994 as Major Loan Manager, and was
promoted to Senior Vice President, Income Property Lending of the Bank in April,
1998. Prior to joining the Bank, Mr. Kadowaki had over fifteen years experience
in commercial and multifamily lending.
Jerrold S. Perisho joined the Bank in May, 2000 as Senior Vice President,
In-Store Banking. Prior to joining the Bank, Mr. Perisho was executive director
of the Whittier Boys & Girls Club. Mr. Perisho has over ten years experience in
credit union management.
Harold L. Rams joined the Bank in 1975 and currently serves as the Senior
Vice President, Single Family Lending. Mr. Rams has over 30 years experience in
the banking industry.
Karen A. Tannheimer joined the Bank in 1983 as the Loan Service Supervisor.
Ms. Tannheimer served in such capacity until 1986 when she left the Bank for a
position with a computer service company. Ms. Tannheimer attained the position
of Supervisor-Systems Analysis Group before leaving the computer services
company to rejoin the Bank in June, 1992. Ms. Tannheimer currently serves as
the Senior Vice President, Loan Service.
Robert C. Teeling joined the Bank in 1991 as the Senior Vice President,
Retail Banking. Prior to joining the Bank, Mr. Teeling had over 20 years
experience in retail banking with various savings and loan associations in the
southern California area.
Dwight L. Wilson has served as Senior Vice President, Treasurer and Chief
Financial Officer of the Company since its formation in 1993. Mr. Wilson joined
the Bank in 1976 as the Assistant Controller and held
7
<PAGE>
that position until 1979. Mr. Wilson served as the Controller of the Bank from
1979 to 1985. Since 1985, Mr. Wilson has been the Treasurer and Chief Financial
Officer of the Bank and QCFC.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the shares of Common Stock beneficially
owned as of September 21, 2000, the Record Date, by each director (and director
nominee), by the Chief Executive Officer and the four most highly compensated
executive officers of the Company and/or the Bank who were serving as executive
officers at June 30, 2000 and who each received total salary and bonus in excess
of $100,000 in fiscal 2000 (the "Named Executive Officers") and by all directors
and executive officers as a group.
<TABLE>
<CAPTION>
Shares of Common
Stock Beneficially Percent of
Name and Address(1) Title(2) Owned (3)(4) Class (5)
------------------------ -------------------------------------------- ------------------ ---------
<S> <C> <C> <C>
J.L. Thomas(6) Chairman of the Board 171,961 3.34%
Frederic R. McGill(7) President and Chief Executive Officer 218,214 4.16%
David S. Engelman(8) Director 6,500 *
Alfred J. Gobar(9) Director 142,996 2.80%
Wayne L. Harvey(10) Director 102,296 2.00%
Edward L. Miller(10) Director 242,604 4.72%
David K. Leichtfuss(10) Director 43,733 *
D.W. Ferguson(11) Director Emeritus 70,679 1.38%
Dwight L. Wilson(12) Senior Vice President, Treasurer and Chief
Financial Officer 86,200 1.67%
Harold L. Rams(13) Senior Vice President, Single Family Lending
of the Association 68,448 1.34%
Kathryn M. Hennigan(14) Corporate Secretary and Senior Vice President,
Administrative Services 84,645 1.64%
All directors and executive
officers as a group (15
persons)(15) 1,367,313 26.56%
</TABLE>
--------------------
* Does not exceed 1.0% of the Company's voting securities.
(1) The address of each person is c/o Quaker City Bancorp, Inc., 7021 Greenleaf
Avenue, Whittier, California 90602.
(2) Titles are for both the Company and the Bank unless otherwise indicated.
(3) Each person effectively exercises sole (or shares with spouse or other
immediate family member) voting and dispositive power as to shares
reported.
(4) All shares beneficially owned have been adjusted for the Stock Dividends.
(5) As of the Record Date, there were 5,096,077 shares of Common Stock
outstanding.
(6) Includes 14,027 allocated shares under the Quaker City Bank Employee Stock
Ownership Plan and Trust (the "ESOP"); 46,093 shares subject to options
granted under the 1993 Management Option Plan, which options are all
currently exercisable, and 6,250 shares subject to currently exercisable
options granted under the 1997 Stock Incentive Plan.
(7) Includes 14,027 allocated shares under the ESOP; 69,845 shares subject to
options granted under the 1993 Management Option Plan, which options are
all currently exercisable, and 79,166 shares subject to currently
exercisable options granted under the 1997 Stock Incentive Plan.
(8) Includes 5,000 shares subject to options granted under the 1993 Directors'
Option Plan, which options are all currently exercisable.
(9) Includes 6,250 shares subject to currently exercisable options granted
under the 1997 Stock Incentive Plan.
8
<PAGE>
(10) Includes 24,257 shares subject to options granted under the Quaker City
Bancorp, Inc. 1993 Directors' Option Plan, which options are all currently
exercisable, and 6,250 shares subject to currently exercisable options
granted under the 1997 Stock Incentive Plan.
(11) Includes 22,343 shares subject to options granted under the 1993
Directors' Option Plan, which options are all currently exercisable, and
6,250 shares subject to currently exercisable options granted under the
1997 Stock Incentive Plan.
(12) Includes 12,661 allocated shares under the ESOP; 46,328 shares subject to
options granted under the 1993 Management Option Plan, which options are
all currently exercisable, and 15,833 shares subject to currently
exercisable options granted under the 1997 Stock Incentive Plan.
(13) Includes 11,859 allocated shares under the ESOP; and 14,167 shares subject
to currently exercisable options granted under the 1997 Stock Incentive
Plan.
(14) Includes 10,258 allocated shares under the ESOP; 47,515 shares subject to
options granted under the 1993 Management Option Plan, which options are
all currently exercisable, and 15,833 shares subject to currently
exercisable options granted under the 1997 Stock Incentive Plan.
(15) Includes 86,012 allocated shares under the ESOP; 100,115 shares subject to
options granted under the 1993 Directors' Option Plan, which options are
all currently exercisable; 253,861 shares subject to options granted under
the 1993 Management Option Plan, which options are all currently
exercisable, and 207,500 shares subject to currently exercisable options
granted under the 1997 Stock Incentive Plan.
9
<PAGE>
COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table sets forth the compensation paid by the Company,
including any of its subsidiaries, to the Named Executive Officers for services
during the fiscal years ended June 30, 2000, 1999 and 1998.
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------------
Annual Compensation(1) Awards Payouts
--------------------------- ----------------------------- ------------
Restricted Shares
Stock Underlying
Award(s) Options LTIP Payouts
Name and Principal Position Year Salary($) Bonus($) ($) (#) ($)
--------------------------- ---- -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
J.L. Thomas 2000 $175,000 $ 84,063 $ -- 5,000(2) $ --
Chairman of the Board 1999 175,000 121,000 -- -- --
1998 175,000 75,900 -- -- --
Frederic R. McGill 2000 $275,000 $154,000 $ -- 25,000 $ --
President and 1999 255,000 137,700 -- 50,000 --
Chief Executive Officer 1998 235,000 99,722 -- -- --
Dwight L. Wilson 2000 $143,700 $ 46,386 $ -- -- $ --
Senior Vice President, Treasurer 1999 135,700 40,140 -- 10,000 --
and Chief Financial Officer 1998 129,200 30,827 -- -- --
Harold L. Rams 2000 $121,300 $ 39,156 $ -- -- $ --
Senior Vice President, Single 1999 116,600 34,980 -- 5,000 --
Family Lending 1998 113,200 26,743 -- -- --
Kathryn M. Hennigan 2000 $115,600 $ 38,009 $ -- -- $ --
Senior Vice President, 1999 109,100 32,730 -- 10,000 --
Administrative Services and 1998 103,900 24,442 -- -- --
Corporate Secretary
</TABLE>
____________________
(1) Under Annual Compensation, the column titled "Salary" includes deferred
compensation. The column titled "Bonus" consists of payments earned in the
reported fiscal year under the Bank's Incentive Compensation Plan.
(2) Mr. Thomas received these shares in his capacity as a director of the Bank.
10
<PAGE>
Stock Options
The following table sets forth information regarding grants of stock
options by the Company during fiscal 2000 to the Named Executive Officers. All
options granted during fiscal 2000 were granted under the Company's 1997 Stock
Incentive Plan. No shares of Common Stock reserved under the 1993 Management
Option Plan are available for future option grants. As of June 30, 2000,
184,773 shares of Common Stock remained available for future Award grants under
the 1997 Stock Incentive Plan.
Option/SAR Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value of
Assumed Annual Rates of
Stock Price Appreciation For
Initial Grants Option Term
---------------------------------------------------------------------------------------------- ----------------------------
Number of Percent of
Securities Total Options/
Underlying SARs Granted
Option/ SARs To Employees Exercise or Base
Name Granted (#) In Fiscal Year Price ($/Sh) Expiration Date 5% ($) 10% ($)
-------------------- ------------ -------------- ---------------- --------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
J.L. Thomas 5,000(1) 0%(1) $15.125 06/15/10 $ 47,645 $120,245
Frederic R. McGill 25,000 41.66 15.125 06/15/10 238,225 601,225
Dwight L. Wilson -0- 0 N/A N/A -0- -0-
Harold L. Rams -0- 0 N/A N/A -0- -0-
Kathryn M. Hennigan -0- 0 N/A N/A -0- -0-
</TABLE>
(1) Mr. Thomas received these shares in his capacity as a director of the
Bank. The grant represents 16.67% of shares granted to directors during the
fiscal year.
The following table sets forth the number of shares of Common Stock covered
by options granted under the 1993 Management Option Plan and under the 1997
Stock Incentive Plan held by the Named Executive Officers at fiscal year-end
June 30, 2000. All shares of Common Stock reserved under the 1993 Management
Option Plan are subject to outstanding options and no shares remain available
under the 1993 Management Option Plan for future option grants. The Named
Executive Officers do not hold any options granted under the 1993 Directors'
Option Plan. Awards under the 1997 Stock Incentive Plan may be granted in the
form of stock options, restricted stock, stock appreciation rights, stock
payments, dividend equivalents, stock bonuses, stock sales, phantom stock and/or
other stock-based benefits. As of June 30, 2000, 184,773 shares of Common Stock
remained available for future Award grants under the 1997 Stock Incentive Plan.
The following table also sets forth the value of unexercised options granted
under the 1993 Management Option Plan and the 1997 Stock Incentive Plan that
were in-the-money at June 30, 2000. Options are "in-the-money" if the fair
market value of the shares covered thereby is greater than the option exercise
price.
11
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values(1)
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year End (#)(2) In-the-Money Options at
Fiscal Year End ($)(3)
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J.L. Thomas -- $ -- 50,260 7,083 $487,433 $ 1,250
Frederic R. McGill 3,013 27,343 128,179 79,166 738,616 6,250
Dwight L. Wilson -- -- 57,995 10,832 489,913 -0-
Harold L. Rams -- -- 10,001 7,499 -0- -0-
Kathryn M. Hennigan 1,000 11,200 59,183 10,832 502,471 -0-
</TABLE>
___________________
(1) No free-standing stock appreciation rights ("SARs") are issuable under the
Company's 1993 Management Option Plan.
(2) Number of shares of Common Stock underlying exercisable options has been
adjusted for the Stock Dividends.
(3) The values of unexercised in-the-money options set forth in the table have
been calculated, in accordance with requirements promulgated by the SEC, by
determining the difference between the fair market value of the underlying
Common Stock at fiscal year-end June 30, 2000 and the exercise price of the
options (as adjusted for the Stock Dividends).
Employment Agreements and Change in Control Arrangements
Employment and Change in Control Agreements
In connection with the conversion of the Bank from mutual to stock form in
December of 1993 (the "Conversion") and the commencement of operations by the
Company as the holding company thereof, the Bank and the Company entered into
employment agreements with Messrs. Thomas and McGill ("Executive,"
respectively). The Bank and the Company also entered into change in control
agreements, which are two-year agreements, with Messrs. Wilson and Rams and
with Ms. Hennigan ("Executive," respectively). The, employment agreements and
change in control agreements were entered into with the intent of ensuring that
the Bank and the Company will be able to maintain a stable and competent
management base after the Conversion. The continued success of the Bank and the
Company depends to a significant degree on the skills and competence of these
individuals.
Mr. Thomas' employment agreements with the Bank and the Company terminated
on September 25, 2000, his sixty-fifth birthday. Mr. McGill's employment
agreements with the Bank and the Company provide for a three-year term.
Commencing on the first anniversary date and continuing each anniversary date
thereafter, the Board of Directors of the Bank may extend the employment
agreement with the Bank for an additional year such that the remaining term
shall be the amount of the original term unless written notice of non-renewal is
given by the Board of Directors of the Bank after conducting a performance
evaluation of the Executive. Effective June 30, 2000, the Bank's Board
extended the employment agreement of Mr. McGill until June 30, 2003. With
respect to his employment agreement with the Company, commencing on the date of
execution of the employment agreement with the Company, the term of the
employment agreement for Mr. McGill extends, unless
12
<PAGE>
earlier terminated, one day each day until such time as the Company's Board of
Directors or the Executive elects not to extend the term of the employment
agreement by giving written notice to the other party, in which case the term of
the employment agreement will be fixed and will end on the third anniversary
date of the written notice.
The employment agreements provide that Mr. McGill will receive an annual
base salary of $295,000, which will be reviewed annually by the Board of the
Bank. In addition to the base salary, the employment agreements provide for,
among other things, disability pay, participation in stock benefit plans and
other fringe benefits applicable to executive personnel.
The employment agreements provide for termination by the Bank or the
Company for cause at any time. In the event the Bank or the Company chooses to
terminate the Executive's employment for reasons other than for cause or for
disability, or in the event of the Executive's resignation from the Bank and the
Company upon: (i) failure to re-elect the Executive to his current offices, (ii)
a material change in the Executive's functions, duties or responsibilities, or
relocation of his principal place of employment, or a material reduction in
benefits or perquisites; (iii) liquidation or dissolution of the Bank or the
Company; or (iv) a breach of the employment agreement by the Bank or the
Company, the Executive or, in the event of death, his beneficiary, would be
entitled to receive an amount equal to: (i) the amount of the remaining salary
payments that the Executive would have earned if he continued his employment
with the Bank or Company during the remaining unexpired term of the employment
agreement at the Executive's defined base salary on the date the Executive was
terminated; (ii) the average of the amount of bonus and any other cash
compensation paid to the Executive during the term of the employment agreement
times the remaining number of years of the employment agreement and any fraction
thereof, and (iii) an amount equal to the average of the annual contributions
that were made on the Executive's behalf to any employee benefit plan of the
Company or Bank during the term of the employment agreement times the remaining
number of years of the employment agreement and any fraction thereof.
If termination of employment follows a "change in control" of the Bank or
the Company, as defined in the employment agreement, the Executive or, in the
event of death, his beneficiary, would be entitled to an aggregate payment from
the Bank and the Company equal to the greater of: (i) the payments due for the
remaining term of the agreement; or (ii) three times the Executive's average
annual compensation for the three preceding taxable years, including bonuses and
any other cash compensation paid or to be paid to the Executive during such
years, and the amount of any contributions made or to be made to any employee
benefit plan. The Bank and the Company would also continue the Executive's
life, health and disability coverage for the remaining unexpired term of the
employment agreements to the extent allowed by the plans or policies maintained
by the Company or Bank from time to time. Payments to the Executive under the
Bank's employment agreements are guaranteed by the Company in the event that
payments or benefits are not paid by the Bank. The employment agreements also
provide for reduced benefits to an Executive upon termination of employment due
to disability and further provide that the Bank and Company shall indemnify the
Executive to the fullest extent allowable under federal and Delaware law. In
the event of a change in control based upon fiscal 2000 salary and bonus, Mr.
McGill would receive approximately $1,353,000 in severance payments in addition
to other cash and noncash benefits provided under the employment agreements.
The change in control agreements with the Bank and the Company provide for
a two-year term for Messrs. Wilson and Rams and Ms. Hennigan. Commencing on the
first anniversary date and continuing on each anniversary thereafter, the change
in control agreements may be extended by the Board of Directors of the Bank for
a year so that the remaining terms shall be two years. Effective June 30, 2000,
the Bank's Board extended the term of the change of control agreements with each
Executive until June 30, 2002. Commencing on the date of execution of the
change in control agreement with the Company, the term of the change in control
agreement extends for one day each day until such time as the Board of Directors
of the Company or the Executive elects not to extend the term of the change in
control agreement by giving written notice to the other party, in which case the
term of the change in control agreement will be fixed and will end on the second
anniversary date of the written notice. Each change in control agreement
provides that at any time following a change in control of the Company or the
Bank, if the Company or the Bank terminates the Executive's employment for any
reason other than cause,
13
<PAGE>
the Executive or, in the event of death, the Executive's beneficiary would be
entitled to receive an aggregate payment from the Bank and the Company equal to
two times the Executive's average annual salary for the two preceding taxable
years, including bonuses and any other cash compensation paid or to be paid to
the Executive during such years and the amount of any contributions made or to
be made to any employee benefit plan. The Bank and the Company would also
continue the Executive's life, health and disability coverage for the remaining
unexpired term of his change in control agreement to the extent allowed by the
plans or policies maintained by the Company or Bank from time to time. Payments
to the Executive under the Bank's change in control agreements are guaranteed by
the Company in the event that payments or benefits are not paid by the Bank. If
a change in control occurs, based upon fiscal 2000 salary and bonus, the amounts
payable to Messrs. Wilson and Rams and Ms. Hennigan, pursuant to the change in
control agreements would be approximately $394,542, $333,042 and $318,778,
respectively, in addition to other cash and noncash benefits provided for under
the change in control agreements.
The change in control agreements and the employment agreements contain a
provision to the effect that in the event of a change in control, the aggregate
payments under the agreements shall not constitute an excess parachute payment
under Section 28OG of the Internal Revenue Code of 1986, as amended ("Code")
(which imposes an excise tax on the recipient and denial of the deduction for
such excess amounts to the employer). Such provision provides that the payments
under the agreements shall be reduced to one dollar below the amount that would
trigger an excise tax under Section 280G.
Change in Control Provisions in Stock Benefit Plans
Both the Quaker City Bancorp, Inc. 1993 Incentive Option Plan and the 1997
Stock Incentive Plan contain change in control provisions. The definition of
"change in control" is the same in both the 1993 Incentive Option Plan and the
1997 Stock Incentive Plan.
The Company's 1993 Incentive Option Plan provides that to the extent not
previously exercisable, options granted under the 1993 Management Option Plan
become exercisable upon a change in control. All outstanding unexercised
options under the 1993 Management Option Plan are currently exercisable. No
shares of Common Stock remain available under the 1993 Management Option Plan
for future option grants.
The 1997 Stock Incentive Plan also contains a change in control provision.
Pursuant to such provision, as of the effective time and date of any change in
control, the 1997 Incentive Stock Plan and any then outstanding Awards granted
thereunder (whether or not vested) shall automatically terminate unless (a)
provision is made in writing in connection with such transaction for the
continuance of the 1997 Stock Incentive Plan and for the assumption of such
Awards, or for the substitution for such Awards of new awards covering the
securities of a successor entity or an affiliate thereof, with appropriate
adjustments as to the number and kind of securities and exercise prices, in
which event the 1997 Stock Incentive Plan and such outstanding Awards will
continue or be replaced, as the case may be, in the manner and under the terms
so provided; or (b) the Board otherwise provides in writing for such adjustments
as it deems appropriate in the terms and conditions of the then-outstanding
Awards (whether or not vested), including without limitation (i) accelerating
the vesting of outstanding Awards and/or (ii) providing for the cancellation of
Awards and their automatic conversion into the right to receive the securities,
cash or other consideration that a holder of the shares underlying such Awards
would have been entitled to receive upon consummation of such change in control
had such shares been issued and outstanding immediately prior to the effective
time of the change in control (net of the appropriate option exercise prices).
If the 1997 Stock Incentive Plan and the Awards terminate by reason of the
occurrence of a change in control without provision for any of the actions
described in clause (a) or (b) of the immediately preceding sentence, then any
holder of outstanding Awards will have the right, at such time immediately prior
to the consummation of the change in control as the Board designates, to
exercise such Awards to the full extent not theretofore exercised, including any
installments which have not yet become vested.
14
<PAGE>
Defined Benefit Plan
The Bank maintains the Quaker City Bank Employee Retirement Income Plan, a
non-contributory defined benefit pension plan ("Defined Benefit Plan") qualified
under the Employment Retirement Income Security Act of 1974, as amended
("ERISA"). Employees become eligible to participate in the Defined Benefit Plan
upon attaining the age of 21 and completing one year of service during which
they have served a minimum of 1,000 hours. Until December 31, 1999, the Plan
was an income replacement retirement plan. The benefits were based on years of
service and the three consecutive years of employment during which the
participant earned the highest compensation. Contributions were intended to
provide not only for benefits attributed to service to date, but also for those
expected to be earned in the future. Effective December 31, 1993, the Plan was
frozen for benefit service accrued, and employees hired after November 30, 1992
did not participate in the Plan.
Due to the December 31, 1993 freezing of participants' years of service
credited, the Board of Directors approved the conversion of the Defined Benefit
Plan into a Cash Balance Plan effective January 1, 2000. Under the provisions
of the Cash Balance Plan, a cash balance account is established for each
participant at plan entry and increased over time with pay and interest credits.
Pay credits are equal to 5.0% of eligible pay and are credited to each
participant's cash balance account annually. Interest credits are based on ten-
year Treasury Note rates and are credited to a participant's cash balance
account quarterly. At termination of employment, a participant (if vested)
becomes entitled to a monthly annuity payable for life (or over a joint lifetime
with his or her beneficiary) at retirement. Although the Cash Balance Plan is
intended to be an ERISA-qualified plan, the Bank has not yet submitted the Cash
Balance Plan for approval as such, due to the recent Internal Revenue Service
(IRS) moratorium on the consideration of cash balance plans. The Bank has
implemented the Cash Balance Plan, effective January 1, 2000, on a provisional
basis, and intends to apply for IRS approval as soon as practicable.
Estimated annual benefits payable at normal retirement age, expressed as a
single life annuity, to each of the Named Executive Officers under the Cash
Balance Plan are as follows:
<TABLE>
<CAPTION>
Name Estimated Annual Benefit
---- ------------------------
<S> <C>
Frederic R. McGill $21,300
Dwight L. Wilson 68,000
Harold L. Rams 57,300
Kathryn M. Hennigan 21,100
</TABLE>
401(k) Plan
Effective July 1, 1997, the Bank implemented a 401(k) Plan. Employees
become eligible to participate in the 401(k) Plan upon attaining the age of 21
and completing one year of service during which they have served a minimum of
1,000 hours. The 401(k) Plan is an ERISA-qualified plan under which employees
may annually defer, on a pretax basis, up to the lesser of 15% of their base
salary or the IRS limitation on employee deferrals ($10,500 for 2000). The Bank
currently contributes on a matching basis 40% of the first 5% of the employees'
contributions to participants' accounts in the 401(k) Plan.
Employee Stock Ownership Plan
At the conversion to a stock company in December, 1993, the Company
established an Employee Stock Ownership Plan ("ESOP") for all employees who are
age 21 or older and have completed one year of service with the Bank during
which they have served a minimum of 1,000 hours. The ESOP is internally
leveraged and
15
<PAGE>
borrowed $3.1 million from the Company to purchase 10% of the outstanding shares
of the common stock of Quaker City Bancorp, Inc. issued in the original
conversion to common stock ownership. The loan will be repaid principally from
the Bank's discretionary contributions to the ESOP. In conjunction with the
conversion of the Bank's income replacement Defined Benefit Plan into a Cash
Balance Plan effective January 1, 2000, and the inclusion of all eligible
employees as participants in the Cash Balance Plan, the Board of Directors
approved an amendment to the ESOP loan agreement and promissory note which
allows the loan underlying the ESOP to be amortized over a longer period of
time. ESOP participants will receive essentially the same benefit, but the
length of time by which the benefit will be earned will be extended from
September 2003 to December 2004. At June 30, 2000 and 1999, the outstanding
balance on the loan was $1.0 million and $1.3 million, respectively. Shares
purchased with the loan proceeds are held in a suspense account for allocation
among participants as the loan is repaid. Contributions to the ESOP and shares
released from the suspense account are allocated among participants on the basis
of compensation, as described in the plan, in the year of allocation. Benefits
generally become 100% vested after five years of vesting service. Vesting will
accelerate upon retirement, death or disability of the participant or in the
event of a change in control of the Bank or the Company. Forfeitures will be
reallocated among remaining participating employees, in the same proportion as
contributions. Benefits may be payable upon death, retirement, early retirement,
disability or separation from service. Since the annual contributions are
discretionary, the benefits payable under the ESOP cannot be estimated.
Retirement Benefit Equalization Plan
Until December 31, 1999, the Bank maintained a nonqualified Supplemental
Executive Retirement Plan ("SERP") for certain employees and their beneficiaries
whose benefits from the Bank's Defined Benefit Plan were reduced by reason of
the annual limitation on benefits and contributions imposed by Section 415 of
the Code and the limitations imposed on compensation taken into consideration in
the determination of benefits under the Defined Benefit Plan due to Section
401(a)(17) of the Code. The SERP provided additional benefits to participants
to ensure that they received an aggregate annual benefit from the Defined
Benefit Plan, the ESOP and Social Security of an amount equal to 65% of such
participants' final average compensation at age 65.
In conjunction with the conversion of the Bank's Defined Benefit Plan into
a Cash Balance Plan effective January 1, 2000, the SERP was converted into a
Retirement Benefit Equalization Plan ("RBEP") for certain employees. J.L.
Thomas' benefit remains under the SERP, and is estimated to be $39,955,
expressed as a single life annuity. The RBEP is a supplemental plan to the Cash
Balance Plan, 401(k) Plan, and ESOP and is intended to provide certain covered
employees with the total amount of retirement income that they would otherwise
receive under these plans if not for legislated ceilings in compliance with
certain sections of the Internal Revenue Code which limit retirement benefits
payable from qualified plans. Under the provisions of the RBEP, a cash balance
account is established for each participant at plan entry and increased over
time with contribution and interest credits. The opening account balance for
each participant was equal to their liability held under the SERP. Contribution
credits are equal to the amounts not contributed under the qualified plans due
to IRS limitations and are credited to each participant's cash balance account
annually. Interest credits are based on ten-year Treasury Note rates and are
credited to a participant's cash balance account quarterly. Benefits for
executives under the RBEP and all qualified plans are expected to be lower than
those under the former SERP and all qualified plans.
16
<PAGE>
The approximate allocation under the RBEP for January 1, 2000 through June
30, 2000 for the Named Executive Officers is as follows:
<TABLE>
<CAPTION>
Estimated
Name Allocation
---- ----------
<S> <C>
Frederic R. McGill................ $49,875
Dwight L. Wilson.................. 4,081
Harold L. Rams.................... 0
Kathryn M. Hennigan............... 0
</TABLE>
Non-Employee Directors' Option Plan
Non-employee directors ("Outside Directors") of the Company and the Bank
are eligible to receive stock options under the Quaker City Bancorp, Inc. 1993
Stock Option Plan for Outside Directors (the "1993 Directors' Option Plan").
The purpose of the 1993 Directors' Option Plan is to promote the growth and
profitability of the Company and the Bank by providing an incentive in the form
of stock options to Outside Directors of outstanding competence to achieve long-
term objectives of the Company and the Bank by encouraging their acquisition of
an equity interest in the Company.
The 1993 Directors' Option Plan authorized the granting of nonqualified
stock options for a total of 161,719 shares of Common Stock (as adjusted for the
Stock Dividends) to Outside Directors. Stock options for an aggregate of
153,634 shares of Common Stock (as adjusted for the Stock Dividends) were
granted to the six Outside Directors at the date of the Conversion at an
exercise price of $7.50 ($4.80, as adjusted for the Stock Dividends) per share,
which was the offering price of the Common Stock in the initial public offering
of the Company. To the extent options for shares are available for grants under
the 1993 Directors' Option Plan, each subsequently elected Outside Director will
be granted nonqualified stock options to purchase 4,041 shares of Common Stock
(as adjusted for the Stock Dividends) or a number of options to purchase such
lesser number of shares as remain in the Directors Option Plan. On September
16, 1999, the date on which he first began to serve as an outside director,
David Engelman received nonqualified stock options to purchase 5,000 shares of
Common Stock under the 1993 Directors' Option Plan. If options for sufficient
shares are not available to fulfill the grant of options to an Outside Director,
and thereafter options become available, such persons shall receive options to
purchase an amount of shares of Common Stock, determined by dividing pro rata
among such persons the number of options available. There are 3,085 shares of
Common Stock (as adjusted for the Stock Dividends) remaining under the 1993
Directors' Option Plan available for future option grants.
All options initially granted under the 1993 Directors' Option Plan in
connection with the Conversion became exercisable January 1, 1995; options
granted to a subsequently elected Outside Director will become exercisable on
the first business day of January following that date on which such subsequent
Outside Director is qualified and first begins to serve as a Director, provided,
however, that in the event of death, disability or retirement of the participant
or upon a change in control of the Company or the Bank, all options previously
granted would automatically become exercisable. Each option granted under the
Directors' Option Plan expires upon the earlier of 10 years following the date
of grant, or one year following the date the Outside Director ceases to be a
director.
1997 Stock Incentive Plan
The 1997 Stock Incentive Plan provides for the grant of Awards in the form
of stock options (including incentive stock options or nonqualified stock
options), restricted stock, stock appreciation rights, stock payments, dividend
equivalents, stock bonuses, stock sales, phantom stock and other stock-based
benefits (referred to herein as "Awards"). Persons eligible to receive an Award
under the 1997 Stock Incentive Plan include directors,
17
<PAGE>
officers, employees, consultants, and advisors of the Company and its affiliated
entities. In July 1997, certain grants of Nonqualified Options were made to
senior executive officers and outside directors under the 1997 Stock Incentive
Plan, which grants were made subject to stockholder approval of the 1997 Stock
Incentive Plan at the Company's 1997 Annual Meeting of Stockholders. The
nonqualified stock options granted have ten-year terms, expiring on July 24,
2007. In April 1998, Hank H. Kadowaki was granted 12,500 Nonqualified Options
upon his becoming a senior executive officer, which options have a ten-year
term, expiring on April 21, 2008. In May 1999, certain grants of nonqualified
stock options were made to senior executive officers, all of which options have
ten-year terms and will expire on May 30, 2009. An amendment to the 1997 Stock
Incentive Plan was approved by the stockholders at the Company's 1999 Annual
Meeting of Stockholders. The amendment increased the number of shares of Common
Stock reserved for issuance under the 1997 Stock Incentive Plan from 233,000
(291,250 shares as adjusted for the 1998 Stock Dividend) to 560,465 (the
aggregate of 291,250 and 269,215), subject to adjustment for future stock
dividends and similar capital changes.
Grants of nonqualified stock options, based on the individual's salary and
length of service, were made to non-executive management of the Bank in
December, 1999. The total share number of these grants is approximately 30,000;
all of these options have ten-year terms, and vest in either three or five equal
annual installments, depending on length of service. In April 2000, Jerrold S.
Perisho was granted 5,000 nonqualified stock options upon being hired as a
senior officer, which options have a ten-year term, expiring on April 20, 2010.
In June 2000, a grant of 25,000 nonqualified stock options, vesting in three
equal annual installments, was made to Chief Executive Officer McGill, and
grants of 5,000 nonqualified stock options with vesting on the first
anniversary of the option grant date were made to each of the outside directors,
all of which options were granted at an exercise price equal to the closing sale
price of the Common Stock, as reported on the Nasdaq National Market on the date
of grant.
For additional information regarding option grants made by the Company to
the Named Executive Officers under the 1997 Stock Incentive Plan in fiscal 2000,
see "COMPENSATION AND OTHER INFORMATION--Stock Options", above. Each of the
options granted to date under the 1997 Stock Incentive Plan expires ten years
following the date of grant. As of September 21, 2000, a total of 185,499
shares of Common Stock remains available for future Award grants to all eligible
persons under the 1997 Stock Incentive Plan.
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee consists of Messrs. Miller (Chairman),
Engelman and Harvey. None of such members is, or formerly was, an officer or
employee of the Company or any of its subsidiaries and none had any relationship
with the Company requiring disclosure herein under applicable rules. In
addition, to the Company's knowledge, no executive officer of the Company serves
as a director or a member of the compensation committee of another entity.
18
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Administration
The compensation program is administered by the Compensation Committee of
the Company's Board of Directors, which is composed of at least two outside,
non-employee directors. The Chairman of the Board, the Chief Executive Officer
and the Senior Vice President, Administrative Services, serve as advisors to the
Compensation Committee. Following review and approval by the Compensation
Committee, all issues pertaining to employment-related contracts are submitted
to the full Board of Directors for approval.
The following is the Compensation Committee report addressing the
compensation of the Company's executive officers for the 2000 fiscal year.
Philosophy
The goals and objectives of the executive compensation policies remain the
same as in previous years. The Compensation Committee's executive compensation
policies are designed to provide competitive levels of compensation that
integrate pay with the Company's annual and long-term performance goals, reward
above average corporate performance, recognize individual initiative and
achievements and assist the Company in attracting and retaining qualified
executives. Targeted levels of executive compensation are set at levels the
Compensation Committee believes to be consistent with others in the financial
services industry, with executives' compensation packages increasingly being
weighted toward programs contingent upon the Company's long-term (three years or
more) performance. As a result, the executives' actual compensation levels in
any particular year may be above or below those of the Company's competitors,
depending upon the Company's performance.
The Company's compensation strategy continues to support the concept of
pay-for-performance, associating the goal of variable pay for variable
performance. A mix of compensation elements, with an emphasis on tying long-
term incentives to corporate performance, is designed to meet this goal. The
mix of compensation elements varies between executive levels within the
organization, with compensation opportunities of senior executives relying more
heavily on annual and long-term incentive compensation.
With regard to Section 162(m) of the Code, which limits the deductibility
of certain executive officer compensation in excess of $1 million, the Company
intends to take all necessary steps to cause the compensation paid to executive
officers to be deductible by the Company.
Performance to Date
The Company's compensation strategy is based on the philosophy that Company
executives should be compensated within competitive norms for their level of
responsibility within the organization. The Company has determined the
competitive marketplace for different executive levels within the organization.
Generally, the competitive marketplace for senior executives has been defined as
financial institutions with assets between $750 million and $1.5 billion that
are located in California.
It should be noted that the Company wishes to compare itself on a broader
basis for corporate performance purposes, and thus the peer group referenced
above for comparison purposes in regard to cash compensation is not identical to
that used in the Stock Price Performance Graph which appears immediately after
this report.
The Compensation Committee conducted its annual review of officers' base
salary levels in June of 1999. As a result of the Compensation Committee
review, senior executives received raises ranging from 4.0% to 8.0% for fiscal
2000. These raises in base salaries reflected the impact of increased job
responsibilities and improved performance.
19
<PAGE>
In the spring of 1997, a competitive review of the current cash
compensation program (base salary and short-term incentive cash compensation)
for Company executives was performed by an independent outside consulting firm,
KPMG LLP. The findings of such review were used by the Compensation Committee
in its executive salary reviews for fiscal 1998 and fiscal 1999. The
Compensation Committee retained independent consulting firm Wm. M. Mercer, Inc.
to perform a new independent review of the executive cash compensation program
in the spring of 1999, the results of which were used for executive salary
reviews for fiscal 2000 and fiscal 2001. The Compensation Committee intends to
undertake an executive cash compensation review in the Spring of 2001.
Annual incentive compensation for both the Chief Executive Officer and the
Chairman of the Board was based solely on corporate goals. For fiscal year
2000, the target incentive for the Chief Executive Officer was 50% of base
salary, while that of the Chairman of the Board was on a profitability-based
graduated scale. For fiscal 2000, these goals pertained to performance in the
following areas: net profit, asset quality, operating expense ratios, regulatory
and compliance ratings, quality of customer service and year 2000 preparation.
In addition, a profitability threshold required for any corporate bonus award
continues to be an integral part of the incentive compensation plan. Incentive
compensation for fiscal 2000 for other executive officers of the Company, with a
target of 30% of base salary, was based 80% upon corporate and 20% upon personal
goal achievement. The annual incentive program also included a profitability
threshold necessary for the payment of any bonus based on corporate goals. In
July of 2000, executive officers received bonuses approved by the Board of
Directors based on both management objectives and their personal goal
achievement, as applicable, during fiscal year 2000.
The third part of executive compensation is the long-term compensation
program, including incentive stock options, nonqualified stock options and stock
grants. Stock options have been granted under both the Company's 1993
Management Option Plan and the 1997 Incentive Stock Plan. The purpose of these
plans is to encourage management stability as well as stock ownership of the
Company.
Under the 1993 Management Option Plan, senior executives received stock
options which offer them the possibility of future gains, depending on the
executive's continued employment by the Company or the Association and the long-
term price appreciation of the Company's Common Stock. At the Conversion,
senior executive officers were granted options under the 1993 Management Option
Plan that vested over a period of three years, with one-third becoming
exercisable on each of January 1, 1995, 1996, and 1997. All shares of Common
Stock reserved under the 1993 Management Option Plan are subject to outstanding
options and no shares remain available under the 1993 Management Option Plan for
future option grants. Under the first grant under the 1997 Stock Incentive
Plan, senior executive officers, except for Mr. Kadowaki, received nonqualified
stock options which vest over a period of three years, with one third becoming
exercisable on each of July 7, 1998, 1999, and 2000. Mr. Kadowaki received
nonqualified stock options upon his appointment in April, 1998 as Senior Vice
President, Income Property Lending of the Bank. One-third of Mr. Kadowaki's
nonqualified stock options will become exercisable on each of April 21, 1999,
2000 and 2001. On May 20, 1999, senior executive officers received nonqualified
stock options which vest over a period of three years, with one third becoming
exercisable on each of May 20, 2000, 2001 and 2002. An amendment to the 1997
Stock Incentive Plan was approved by the stockholders at the Company's 1999
Annual Meeting of Stockholders. The amendment increased the number of shares of
Common Stock reserved for issuance under the 1997 Stock Incentive Plan from
233,000 (291,250 shares as adjusted for the 1998 Stock Dividend) to 560,465 (the
aggregate of 291,250 and 269,215), subject to adjustment for future stock
dividends and similar capital changes.
Jerrold S. Perisho received nonqualified stock options upon being hired in
May, 2000 as Senior Vice President, In-Store Banking of the Bank. One-third of
Mr. Perisho's nonqualified stock options will become exercisable on each of
April 20, 2001, 2002, and 2003. In June 2000, a grant of nonqualified stock
options was made to Chief Executive Officer McGill. For further information
regarding this grant, see the section of this proxy entitled "Chief Executive
Officer Compensation," below.
20
<PAGE>
Awards under the 1997 Stock Incentive Plan may be granted in the form of
stock options, restricted stock, stock appreciation rights, stock payments,
dividend equivalents, stock bonuses, stock sales, phantom stock and/or other
stock based benefits. As of September 21, 2000, 185,449 shares of Common Stock
remain available for future grants of Awards under the 1997 Stock Incentive
Plan. Pursuant to the terms of the 1997 Stock Incentive Plan, no one eligible
person may be granted Awards with respect to more than 100,000 shares of Common
Stock in any one calendar year.
Chief Executive Officer Compensation
The base salary for Mr. McGill for fiscal year 2000 was increased by 7.8%
as a result of peer cash compensation comparisons. Mr. McGill's target short
term incentive level increased to 50% of base salary as a result of the
Committee's implementation of a recommendation of the 1999 executive
compensation study by Wm. M. Mercer, Inc. The annual incentive bonus payout is
based on the same corporate goal achievement, including a profitability
threshold, as all other executives. In July of 2000, Mr. McGill received an
incentive bonus of $154,000, approved by the Board of Directors, and based on
corporate goal achievement during fiscal year 2000.
The executive cash compensation study performed by Wm. M. Mercer, Inc. in
the spring of 1999 found Mr. McGill's base salary to be below the 50th
percentile of base salaries for competitor organizations. As a result, for
fiscal 2001, Mr. McGill will receive a base salary of $295,000, a 7.0% increase
over the previous year.
In an initial grant under the 1997 Stock Incentive Plan, the Compensation
Committee awarded Mr. McGill Nonqualified Options to purchase 62,500 shares of
Common Stock (as adjusted for the 1998 Stock Dividend). In May of 1999, in a
second grant to senior executives under the 1997 Stock Incentive Plan, the
Compensation Committee awarded Mr. McGill Nonqualified Options to purchase
50,000 shares of Common Stock. In June, 2000, the Compensation Committee
awarded Mr. McGill Nonqualified Options to purchase 25,000 shares of Common
Stock. The number of options granted to Mr. McGill under the 1997 Stock
Incentive Plan was based upon several factors, including past performance,
present and future responsibility of his position and further aligning the Chief
Executive Officer's interests with those of the Company's stockholders. Each of
Mr. McGill's grants under the 1997 Stock Incentive Plan vests over a three-year
period, and exercise prices of each are based on the closing sale price of the
Common Stock, as reported on the Nasdaq National Market on the date of grant.
Conclusion
The Committee believes that the current compensation policies for the
Company and the Bank are both effective and appropriate. For fiscal years 1998,
1999 and 2000, when the profit threshold was met, there was in place a
compensation mix which increasingly relies on incentive compensation for
corporate goal achievement.
2000 COMPENSATION COMMITTEE
David S. Engelman
Wayne L. Harvey
Edward L. Miller
The report of the Compensation Committee shall not be deemed incorporated
by any general statement incorporating by reference this proxy statement into
any filing under the Securities Act of 1933, as amended (the "Securities Act"),
or under the Exchange Act, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
21
<PAGE>
Stock Price Performance Graph
The stock price performance graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or the Exchange Act, except
to the extent that the Company specifically incorporates this information by
reference and shall not otherwise be deemed filed under such Acts.
The graph below compares the cumulative total stockholder return of the
Company's Common Stock with the cumulative total return of the NASDAQ National
Market System equity index and Media General's Savings and Loan Industry Group
index from June 30, 1995 through June 30, 2000. The graph assumes that $100 was
invested on June 30, 1995 in the Common Stock and each index and that all
dividends were reinvested. No cash dividends have been declared on the
Company's Common Stock since the Company's formation in September 1993.
Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
COMPARISON OF CUMULATIVE TOTAL RETURN OF
COMPANY, INDUSTRY INDEX AND BROAD MARKET
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period Quaker City Savings NASDAQ
(Fiscal Year Covered) Bancorp, Inc. & Loan Market Index
------------------- ------------- --------- -----------
<S> <C> <C> <C>
Measurement Pt- 1995 $100.00 $100.00 $100.00
FYE 1996 $119.02 $127.08 $125.88
FYE 1997 $190.90 $205.64 $151.64
FYE 1998 $250.00 $278.10 $201.01
FYE 1999 $224.18 $232.65 $281.68
FYE 2000 $208.90 $193.57 $423.84
</TABLE>
1. Quaker City Bancorp, Inc. returns were calculated based on the closing sale
prices per share of the Common Stock as follows (as adjusted for the Stock
Dividends): 6/30/95, $7.36; 6/30/96, $8.76; 6/30/97, $14.05; 6/30/98,
$18.40; 6/30/99, $16.50; 6/30/2000, $15.375.
22
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the Record Date, (i) the name of each
person believed by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) the total number of shares of Common Stock
beneficially owned by each such person and (iii) the percentage of all Common
Stock outstanding held by each such person.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership(1) Percent of Class (1)(2)
-------------- ------------------- ----------------------- -----------------------
<S> <C> <C> <C>
Common Stock Quaker City Bank Employee 273,630 shares(3)(4) 5.37%
Stock Ownership Plan and
Trust ("ESOP")
7021 Greenleaf Avenue
Whittier, CA 90602
</TABLE>
___________________
(1) Share amounts have been adjusted for the Stock Dividends.
(2) As of the Record Date, there were 5,096,077 shares of Common Stock (as
adjusted for the Stock Dividends) outstanding.
(3) Shares of Common Stock were acquired by the ESOP in the Conversion. A
committee which consists of non-employee members of the Board of Directors
of the Association administers the ESOP (the "ESOP Committee"). An
unrelated third party has been appointed as the corporate trustee for the
ESOP ("ESOP Trustee"). The ESOP Committee may instruct the ESOP Trustee
regarding investment of funds contributed to the ESOP. The ESOP Trustee
must vote all allocated shares held in the ESOP in accordance with the
instructions of the participating employees. Under the ESOP, unallocated
shares held in the suspense account will be voted by the ESOP Trustee in a
manner calculated to most accurately reflect the instructions received from
participants regarding the allocated stock so long as such vote is in
accordance with the provisions of the Employee Retirement Income Security
Act of 1974, as amended. As of the Record Date, 363,460 shares of Common
Stock (as adjusted for the Stock Dividends) in the ESOP had been allocated,
but not distributed, to participating employees, including 86,011 shares (as
adjusted for the Stock Dividends) allocated to executive officers as
described in the footnotes to the Security Ownership of Management table as
of the Record Date. As of the Record Date, 44,706 shares of Common Stock in
the ESOP had been distributed.
(4) Includes unallocated as well as allocated but unvested ESOP shares. While
allocated but unvested shares are voted by participants, they are subject to
forfeiture until fully vested.
RELATED PARTY TRANSACTIONS
Section 11 of the Home Owners' Loan Act requires that all loans or
extensions of credit by the Bank to executive officers and directors of the
Bank, of the Company and of the Company's other subsidiaries (collectively,
"Insiders") or to companies which an Insider controls ("Related Interests"),
must be made on substantially the same terms (including interest rates and
collateral) as, and must follow credit underwriting procedures not less
stringent than, those prevailing at the time for comparable transactions with
the general public, and must not involve more than the normal risk of repayment
or present other unfavorable features. In addition, loans made to an Insider or
Related Interest in excess of the lesser of (a) $500,000, or (b) the greater of
$25,000 or 5% of the Bank's capital and surplus, must be approved in advance by
a majority of the entire Board of Directors of the Bank, with interested
directors abstaining from participating directly or indirectly in the voting.
The aggregate loans by the Bank to an Insider and his or her Related Interests
generally may not exceed 15% of the Bank's capital, and the aggregate of all
loans by the Bank to all of its Insiders and their Related Interests generally
may not exceed 100% of the Bank's capital.
23
<PAGE>
It is the policy of the Bank to offer loans to executive officers and
directors on their principal residence and to offer to extend a line of credit
for overdraft protection on a checking account held at the Bank. The Bank's
policy provides that all loans to its executive officers and directors shall be
made in the ordinary course of business, shall be made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with all other employees and shall not involve more
than the normal risk of collectibility or present other unfavorable features.
During fiscal 2000, director Wayne Harvey and executive officers Kathryn
Hennigan and Karen Tannheimer had loans from the Bank. The largest amount of
indebtedness of each during fiscal year 2000 and the outstanding balance of each
is as listed below:
<TABLE>
<CAPTION>
Name Largest FY Indebtedness Balance as of June 30, 2000
------------------------ ----------------------------- ------------------------------------
<S> <C> <C>
Harvey 97,000.00 92,000.00
Hennigan 224,376.58 221,816.27(1)
Tannheimer 189,953.74 187,765.01(1)
</TABLE>
________________
(1) Ms. Hennigan's and Ms. Tannheimer's loans have been sold to FNMA; the Bank
retains the servicing.
The loans were made by the Bank in conformance with the Bank policy on loans to
executive officers, directors, and employees.
In connection with the Conversion of the Bank and the commencement of
operations of the Company, the Bank and the Company entered into two-year change
in control agreements with executive officers Hank K. Kadowaki, Jerrold S.
Perisho, Karen A. Tannheimer and Robert C. Teeling. The terms of such
agreements are the same as those of the change in control agreements entered
into by the Bank and the Company with Messrs. Wilson and Rams and Ms. Hennigan
described above under "COMPENSATION AND OTHER INFORMATION--Employment Agreements
and Change in Control Arrangements."
As part of the Conversion, an ESOP was established by the Bank. The ESOP
borrowed $3,105,000 from the Company to purchase 646,875 shares of Common Stock
(as adjusted for the Stock Dividends) of the Company. As of the Record Date,
242,579 shares of Common Stock (as adjusted for the Stock Dividends) held by the
ESOP were unallocated to individual participant accounts. Such shares
constituted 4.76% of the outstanding Common Stock as of the Record Date. At
June 30, 2000, the outstanding balance of the loan was $1.0 million.
Mr. Miller is a partner of the law firm of Bewley, Lassleben & Miller. The
Company retained such law firm during fiscal 2000 and has continued to retain
the firm in fiscal 2001. The amount of fees paid to the firm in fiscal 2000 did
not exceed five percent of the law firm's gross revenues for the firm's last
full fiscal year.
24
<PAGE>
ELECTION OF DIRECTORS
At the Annual Meeting, stockholders of the Company will be asked to vote on
the election of three directors. The three nominees receiving the highest
number of votes at the Annual Meeting will be elected directors of the Company.
To fill these board positions, the enclosed proxy, unless indicated to the
contrary, will be voted FOR the nominees listed below and on the enclosed proxy
card. All directors elected at the Annual Meeting will be elected to three-year
terms and will serve until the annual meeting of stockholders to be held in the
year 2003 and until their successors have been duly elected and qualified.
Set forth below are the names of persons nominated by the Company's Board
of Directors for election as directors at the Annual Meeting. Your proxy,
unless otherwise indicated, will be voted FOR Messrs. Harvey, Miller and Thomas.
For a description of Mr. Harvey's, Mr. Miller's and Mr. Thomas' principal
occupation and business experience during the last five years and present
directorships, please see "DIRECTORS AND EXECUTIVE OFFICERS--Directors," above.
<TABLE>
<CAPTION>
First First Term as
Became Became Company
Director of Director of Director
Name Current Occupation Bank Company Expires
---- ------------------ ---- ------- -------
NOMINEES FOR ELECTION
<S> <C> <C> <C> <C>
Wayne L. Harvey C.P.A., retired Managing Partner, 1981 1993 2000
Harvey & Parmelee
Edward L. Miller Partner, law firm of Bewley, Lassleben 1985 1993 2000
& Miller
J.L. Thomas Chairman of the Board of the Company 1975 1993 2000
and of the Bank
CONTINUING DIRECTORS
David S. Engelman Private investor 1999 1999 2002
David K. Leichtfuss President, Broadview Mortgage 1991 1993 2002
Alfred J. Gobar President and Chairman, AJGA, Inc. 1992 1993 2001
Frederic R. McGill President and Chief Executive Officer 1995 1995 2001
of the Company and of the Bank
</TABLE>
The Company has been advised by each nominee named in this Proxy Statement
that he is willing to be named as such herein and is willing to serve as a
director if elected. However, if any of the nominees should be unable to serve
as a director, the enclosed proxy will be voted in favor of the remainder of
those nominees not opposed by the stockholder on such proxy and may be voted for
a substitute nominee selected by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE NOMINEES LISTED
---
ABOVE.
25
<PAGE>
THE COMPANY'S RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP has been the independent certified public accounting firm for the
Bank since 1969 and for the Company since commencement of its business
operations following the Conversion of the Bank from mutual to stock form on
December 30, 1993, and has been selected by the Company to continue to serve as
the accountants for the Company for fiscal 2001. Representatives of KPMG LLP
are expected to attend the Annual Meeting with an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
STOCKHOLDERS' PROPOSALS
Any stockholder of the Company wishing to have a proposal considered for
inclusion in the Company's proxy solicitation materials relating to the
Company's 2001 annual meeting of stockholders must give notice of such proposal
in writing to the Corporate Secretary of the Company at its principal executive
offices and such notice must be received on or before May 31, 2001. The notice
must comply with Section 6 of Article I of the Company's Bylaws (a copy of which
is available upon request to the Corporate Secretary of the Company), which
section requires that the notice contain a brief description of such proposal
and the reason for conducting such business at the annual meeting, the name and
address, as they appear on the Company's books, of the stockholder making such
proposal, the number of shares of Common Stock beneficially owned by such
stockholder and any material interest of such stockholder in such proposal. The
Board of Directors will review proposals from eligible stockholders which it
receives by that date and will determine whether any such proposal will be
included in its 2001 proxy solicitation materials. An eligible stockholder is
one who upon submission of the proposal is the record or beneficial owner of at
least 1% or $1,000 in market value of securities entitled to vote at the 2001
annual meeting of stockholders, who has held such securities for at least one
year and who shall continue to own such securities through the date on which the
meeting is held.
OTHER MATTERS
At the time of preparation of this Proxy Statement, the Board of Directors
of the Company was not aware of any other matters to be brought before the
Annual Meeting. No eligible stockholder had submitted notice of any proposal 90
days before the date of the Annual Meeting. However, if any other matters are
properly presented for action, in the absence of instructions to the contrary,
it is the intention of the persons named in the enclosed form of proxy to vote,
or refrain from voting, in accordance with their respective best judgment on
such matters.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Exchange Act ("Section 16") and the rules
promulgated thereunder (the "Rules") and requirements of the National Bank of
Securities Dealers, Inc. (the "NASD"), officers and directors of the Company and
persons who beneficially own more than 10% of the Common Stock of the Company
are required to file with the SEC and the NASD and furnish to the Company
reports of ownership and change in ownership with respect to all equity
securities of the Company.
Based solely on its review of the copies of such reports received by it
during or with respect to the fiscal year ended June 30, 2000 and/or written
representations from such reporting persons, the Company believes that all
reports required to be filed by such reporting persons during or with respect to
the fiscal year ended June 30, 2000 were timely filed, except that Ms.
Tannheimer filed one Form 5 late relating to a gift of Common Stock to a
charitable organization.
26
<PAGE>
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report to Stockholders for the fiscal year ended June
30, 2000, including audited financial statements, is being mailed to
stockholders along with these proxy materials. This year's Annual Report to
Stockholders includes the Annual Report on Form 10-K as filed with the SEC.
Exhibits to the Annual Report on Form 10-K may be obtained from the Company upon
payment of the Company's reasonable expenses to furnish such exhibits. To
obtain any such exhibits, contact Kathryn Hennigan, Corporate Secretary, Quaker
City Bancorp, Inc., 7021 Greenleaf Avenue, Whittier, California 90602.
By order of the Board of Directors
/s/ KATHRYN M. HENNIGAN
KATHRYN M. HENNIGAN
Corporate Secretary
Whittier, California
October 5, 2000
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
If your shares are held in the name of a brokerage firm, bank nominee or
other institution, only it can vote your shares. Accordingly, please contact
the person responsible for your account and give instructions for your shares to
be voted.
If you have any questions, or have any difficulty voting your shares,
please contact Morrow & Co. by calling 1-800-856-8309.
27
<PAGE>
APPENDIX A
<TABLE>
<CAPTIOM>
=================================================================================================================
Quaker City Bancorp, Inc.
General Administration
Company Policy Statement
=================================================================================================================
<S> <C> <C>
Issued By: Board of Directors April 20, 2000
=================================================================================================================
Subject: Audit Committee Charter Policy #: IAx-100
=================================================================================================================
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Board Adopted: 4/20/00 As New: X Restated: Amendment:
---------------------------------------------------------------------------------------------------------------
For Review: As Needed: Annually: X
---------------------------------------------------------------------------------------------------------------
</TABLE>
Authority
Primary responsibility for the Company's financial reporting and internal
operating controls is vested in senior operating management as overseen by
the Board of Directors (the "Board"). The Audit Committee, which is a
standing committee of the Board, is established to assist it in fulfilling
its statutory and fiduciary responsibilities.
The Audit Committee shall have unrestricted access to Company personnel and
documents and will be given the resources necessary to discharge its
responsibilities. The Audit Committee will meet quarterly and call special
meetings, as they believe required. The Audit Committee Chair will meet
with the internal auditors at least once a month to review their progress
and report to the Audit Committee and Board thereon.
The Audit Committee may at its sole discretion and without consultation
with management or the Board obtain separate legal counsel or other outside
professional services to enable it to fulfill the responsibilities set
forth in this charter.
Committee Membership
The membership of the Audit Committee shall consist of three outside
directors, each of whom is financially literate, one of whom has an
accounting or related financial management expertise, and who are all
independent from management and the Company. One of the members shall
serve as chair.
Members of the Audit Committee shall be considered independent if in the
opinion of the Board they have no relationship to the Company that may
interfere with the exercise of their independence from management and the
Company.
General Responsibilities
1. The Audit Committee reports committee actions to the full Board and may
make appropriate recommendations.
<PAGE>
Audit Committee Charter
April 20, 2000
Page 2
2. The Audit Committee has the authority to direct, conduct or authorize
investigations brought to its attention within the scope of its
responsibilities.
Responsibilities regarding outside auditors and internal auditors
1. The Audit Committee will select the outside auditor for Company annual
audits. The Committee's selection is subject to approval by the Board.
2. The Audit Committee will review the fee arrangement negotiated by
management with the outside auditors.
3. The outside auditor is ultimately accountable to the Board and the Audit
Committee, as representative of shareholders. These shareholder
representatives have the ultimate authority and responsibility to
select, evaluate and, where appropriate, replace the outside auditor.
4. The Audit Committee will review and have veto power over the
appointment, replacement, reassignment or dismissal of the internal
auditors. The Audit Committee, in conjunction with the Company's Chief
Executive Officer, will conduct the annual performance and salary
reviews of the internal auditors.
5. The Audit Committee will confirm and ensure the independence of the
internal auditors and the outside auditor. The Audit Committee is
responsible for ensuring its receipt from the outside auditor of a
formal written statement delineating all relationships between them and
the Company, consistent with Independence Standards Board Standard 1.
The Audit Committee is also responsible for actively engaging in a
dialogue with the outside auditor with respect to any disclosed
relationships or services that may impact the objectivity and
independence of the outside auditor and for taking, or recommending that
the full Board take, appropriate action to ensure the independence of
the outside auditor.
6. The Audit Committee will consider, in consultation with the outside
auditor and the internal auditors, the annual audit scope and procedural
plans made by the internal auditors and the outside auditor.
7. The Audit Committee will ensure that the internal auditors and outside
auditor coordinate the internal and external audits to ensure
completeness of coverage, reduce redundancy and the use of audit
resources effectively.
Responsibilities for reviewing internal audits, the annual external audit
and the review of quarterly and annual financial statements
1. The Audit Committee will ensure that the outside auditor will provide
the Audit Committee with a timely analysis of significant reporting
issues, an audit of the Company's annual financial statements, and a
review of the Company's quarterly financial statements.
2. The Audit Committee will engage in discussion regarding the outside
auditor's judgments about the quality, not just the acceptability, of
the Company's accounting principles as applied in its financial
reporting. Discussions shall include the following issues:
<PAGE>
Audit Committee Charter
April 20, 2000
Page 3
- Consistency, clarity and completeness of the Company's accounting
policies and disclosures
- Degree of aggressiveness or conservatism of the Company's accounting
principles and underlying estimates
- Other significant decisions made by management in applying accounting
principles
These discussions will focus on items that have a significant impact on the
representational faithfulness, verifiability and neutrality of the
financial statements.
3. The Audit Committee will inquire about the existence and substance of
any significant accounting accruals, reserves or estimates made by
management that had or may have a material impact on the financial
statements.
4. The Audit Committee will determine the open years on federal and state
income tax returns and whether there are any significant items that have
been or might be disputed by the taxing authorities and inquire about
the status of related tax reserves.
5. The Audit Committee will inquire of management, the internal auditors
and the outside auditor about significant financial risks and exposures
and will assess management's steps to minimize them.
6. The Audit Committee will review annually the following with the outside
auditor and the internal auditors:
- The adequacy of the Company's internal controls, including
computerized information system controls and security.
- Any significant findings and recommendations together with
management's response to them.
7. The Audit Committee will consider and review with management and the
internal auditors:
- Any significant findings during the year and management's response to
them.
- Any difficulties the internal auditors encountered while conducting
audits, including any restrictions on the scope of their work or
access to required information.
- Any changes to the planned scope of the internal audit plan that the
committee thinks advisable.
- The internal audit department's budget and staffing.
- Whether the internal auditors have complied with the Institute of
Internal Auditor's Standards for the Professional Practice of
Internal Auditing.
8. The Audit Committee will review the Company's annual financial
statements, including the independent accountant's opinion and
management letters, and the Company's Report on Form 10-K related
thereto. The Audit Committee, or a representative thereof, shall review
the Company's quarterly financial statements and the Form 10-Q related
thereto.
<PAGE>
Audit Committee Charter
April 20, 2000
Page 4
Responsibilities regarding Corporate Governance
The responsibility of the Audit Committee in the area of corporate
governance is to provide assurance that the Company is in compliance with
pertinent laws and regulations, is conducting its affairs ethically, and is
maintaining effective controls against employee conflict of interest and
fraud. To accomplish this, the Audit Committee will:
- Review Company policies relating to compliance with laws and
regulations, ethics, conflict of interest, and the investigation of
misconduct of fraud.
- Review current and pending litigation or regulatory proceedings bearing
on corporate governance in which the Company is a party.
- Review significant cases of employee conflict of interest, misconduct or
fraud.
- Review in-house policies and procedures for regulatory review of
officer's expenses and perquisites, including use of Company assets.
- Review and approve the functional and organizational framework of the
Internal Audit Department for providing services to management and to
the Audit Committee, including the purpose, responsibility, authority
and reporting relationships of the internal audit function.
- Determine the extent to which the planned audit scope of internal
auditing and the outside auditor can be relied upon to detect fraud or
weaknesses in internal controls, and review management's plans to
monitor compliance with these internal controls.
- Discuss with the internal auditors and the outside auditor the review of
the Company's electronic data processing procedures and controls.
Periodic responsibilities
The Audit Committee will periodically:
- Review and reassess the adequacy of this charter at least annually.
- Review legal and regulatory matters that may have a material effect on
the Company's financial statements, compliance policies and programs and
reports from regulators.
- Meet with the internal auditors, the outside auditor and management in
separate sessions to discuss any matters the committee or these groups
believe should be discussed privately with the Audit Committee.
<PAGE>
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REVOCABLE PROXY
QUAKER CITY BANCORP, INC.
The undersigned hereby appoints Frederic R. (Rick) McGill and Dwight L.
Wilson, or either of them, each with full power of substitution, as the lawful
proxies of the undersigned and hereby authorizes such persons to represent and
to vote as designated below all shares of the common stock of Quaker City
Bancorp, Inc. (the "Company") which the undersigned would be entitled to vote
if personally present at the 2000 Annual Meeting of Stockholders of the Company
to be held on November 15, 2000 and at any adjournments or postponements
thereof (the "2000 Annual Meeting").
1. ELECTION OF DIRECTORS
[_] FOR all nominees [_] WITHHOLD AUTHORITY to
listed below (except vote for all nominees
as indicated to the listed below
contrary below)
Jerome L. Thomas
Wayne L. Harvey
Edward L. Miller
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name here:
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2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the 2000 Annual Meeting.
[_] FOR [_] AGAINST [_] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS. IMPORTANT--
PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY. THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
(Continued on other side)
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THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR EACH OF THE PROPOSALS.
The undersigned acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement for the 2000 Annual Meeting.
When signed as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name
by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Whether or not you plan to attend the 2000 Annual Meeting, you are urged to
execute, date and return this proxy, which may be revoked at any time prior to
its use.
Dated:____________________, 2000
________________________________
(Signature of Stockholder)
________________________________
(Signature of Additional
Stockholder(s))
Please sign your name exactly as
it appears hereon, date and
return this proxy in the reply
envelope provided. If you
receive more than one proxy
card, please sign, date and
return all cards received.
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